Economic part 1

The assumptions of perfect competition imply that:

• individuals in the market accept the market price as given.

• individuals can influence the market price.

• each firm in the market knows only its own price.

• the price set in the market is collectively determined by the four largest firms.

Jackson operates in a perfectly competitive market. As a price taker, he:

• can select a price from a wide range of alternatives

• can select the lowest price available in the competitive market.

• can select the average of prices available in the competitive market.

• cannot affect the price of a good in the market.

Alyssa is operating a firm in perfect competition. Her total revenue comes from the firm's:

• change in revenue resulting from a unit change in output.

• ratio of revenue to the quantity of output.

• revenue in excess of cost.

• total output times the price of that output.

If a perfectly competitive firm decreases production from 110 units to 100 units, and the market price is $20 per unit, the firm's total revenue will be:

• –$200.

• $200.

• $2000.

• $2100.

The difference between total revenue and total cost is:

• the economic profit or loss.

• nominal revenue.

• average revenue.average revenue.

• marginal revenue.

Marginal revenue:

• is the slope of the average revenue curve.

• equals the market price in perfect competition.

• is the change in quantity divided by the change in total revenue.

• is the price divided by the change in quantity.

A firm's marginal revenue is the:

• ratio of total revenue to total cost.

• ratio of average revenue to quantity.

• price per unit times the number of units sold.

• change in total revenue arising from the sale of an additional unit of output.

For a perfectly competitive firm, marginal revenue:

• is less than price.

• is greater than price.

• decreases as the firm increases output.

• is equal to price.

A perfectly competitive firm will maximize profit when:

• marginal revenue is equal to marginal cost.

• marginal revenue is less than average cost.

• marginal revenue is equal to average total cost.

• marginal revenue is greater than marginal cost.

Lily's Patisserie operates in a perfectly competitive industry and has standard cost curves. Suppose the firm's variable costs rise, causing its AVC and ATC curves to shift upward. The demand for Lily's pastries does not change, nor does the firm shut down. To maximize profits after the rise in variable costs, Lily's will _____ its price and _____ its level of production.

• raise; increase

• decrease; increase

• raise; decrease

• not change; decrease